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A $24 billion bailout money proposal by Federal Deposit Insurance Corporation (FDIC) to support 1.5 million struggling borrowers will supposedly prevent foreclosures through modified loans by end of year 2009. It can be recalled that the same proposal was opposed by the Bush Administration and was once again moved last week by FDIC Chairman Sheila Bair.

During a hearing last week, Bair urged a more aggressive action by the government in helping millions of borrowers avoid foreclosures. She said it would be a necessary move to achieve economic recovery.

This has brought a division among the house with Democrats supporting the proposal. Even House Speaker Nancy Pelosi, from the District of California, insisted the opposing Treasury Secretary Henry Paulson, publicly to side with the FDIC plan. Also, in a statement made by Pelosi, solutions to home foreclosure problems have been present for a while and it would be an unacceptable move if they are delayed further.

However, dissatisfaction of lawmakers also plays a significant role especially since the Congress is capable of imposing new conditions on bailout money use. Although Democrats are for the idea of pushing money for the aid of challenged auto industry as well as struggling homeowners, legislative move is seemingly frozen until President-elect Barrack Obama’s administration starts on mid-January 2009.

Paulson reaffirmed his opposition, even citing a program during the previous year wherein borrowers serviced by Fannie Mae and Freddie Mac, two of the government mortgage giants, would be allowed longer terms for a more affordable payment or even reduction of interest rates which would help the homeowner prevent foreclosures. This statement however, was criticized by Bair stating the plan had fallen short of the needs.

With FDIC’s proposal, 2.2 million of the top at risk loans of struggling homeowners would be allowed modification of their mortgages to avoid foreclosures. Apart from that, even the servicer gets to benefit — being granted $1,000 for every loan modified.